The development of fracking has caused concern with many as to the potential dangers of the process and the question is damage caused by fracking covered by insurance policies is being increasingly asked by clients, particularly those in areas where the process is currently in practice or have been identified as potential areas for development.
What is fracking?
The process of fracking, short for hydraulic fracturing, is the process of drilling into the rock and pumping water at high pressure both vertically and along horizontal planes in the rock in order to release natural gas and oil from the shale rock. This gas or oil is then forced up to the well head for collection.
What damage does fracking cause?
It has been suggested that the process of fracking could be responsible for earth tremors due to the disruption of the bed rock by the high pressures involved in the process. In the United Kingdom experts point to two minor earth tremors in the Blackpool area following fracking as evidence of this. If this is correct then it is reasonably foreseeable that such tremors could result in property damage to buildings and structures on the surface.
Is fracking an excluded peril as standard under insurance policies?
This question has been raised previously and the answer is that fracking is not an excluded peril as it is not actually an insured peril under standard insurance policies. Any damage caused by fracking would almost certainly result in a claim under the earthquake, subsidence, ground heave or landslip cover under the policy. There is currently no general exclusion of fracking under any of these perils, nor any other, on any personal or commercial insurance product we are aware of. Such news would be considerable interest in the insurance industry and the introduction of such an exclusion would certainly gain considerable publicity in both the insurance and wider media.
Am I insured for damage caused by fracking?
it is impossible to answer for every circumstance but standard buildings policies, whether these be household insurance, property owners insurance or commercial property insurance would generally provide the cover to respond to damage caused to a property by fracking.
What actions might insurers take regarding fracking?
Underwriters in insurance companies use a wide range of information in determining the risks faced under the policies they issue and the use of postcode information is considerable and targeted down to the second half of the postcode. It would seem reasonable that rather than introduce a general exclusion of fracking under policies, if an insurer is concerned about the potential or any developing threat from fracking then then will use postcode data to reduce the threat by either not offering insurance in those areas or as is often the case rating the business as to deter any policyholder.
We have not seen any evidence of this in action as yet. We shall update this information when appropriate to do so.
What should I do if my insurance if is affected by fracking?
if you receive any notification of a restriction in your cover, ether at quotation stage or in your annual renewal documentation you should contact your insurance broker immediately for assistance, alternatively you may contact us directly to discuss your concerns with one of our broker team.